Kevin Drum - February 2011

Unions and Growth

| Mon Feb. 28, 2011 7:56 PM EST

Here is Robert Barro in the Wall Street Journal today making the case for anti-union policies:

There is evidence that right-to-work laws—or, more broadly, the pro-business policies offered by right-to-work states—matter for economic growth. In research published in 2000, economist Thomas Holmes of the University of Minnesota compared counties close to the border between states with and without right-to-work laws (thereby holding constant an array of factors related to geography and climate). He found that the cumulative growth of employment in manufacturing (the traditional area of union strength prior to the rise of public-employee unions) in the right-to-work states was 26 percentage points greater than that in the non-right-to-work states.

It's true that Holmes wrote this paper. You can read it here if you like, or you can read a shorter, more accessible version here. In a technical sense, it's an interesting bit of research. As Holmes says, "In state capitals throughout the country, proponents of pro-business policies routinely claim that state policies are an important determinant of business location. But this claim is open to debate. While there has been no shortage studies on the issue, there is a lack of consensus."

Well, guess what? Holmes concluded that if moving a few miles across a state border allows a manufacturing business to reside in a right-to-work state with low taxes, no unions, and lax environmental policies, lots of manufacturing businesses will jump at the chance. It's good to see some rigorous confirmation of this, I suppose, but let's face it: It's hardly a surprise, is it? It would be pretty shocking if it weren't true.

Still, does this say anything about the effect of unions on economic growth, as Barro implies? No. Not a single thing. All it says is that businesses prefer locating in states where costs are low and rules are lax — something I think we all knew already. Of course that's what businesses prefer. But it says literally nothing at all about whether the United States as a whole would have higher or lower growth if every state either did or didn't have right-to-work laws. Implying otherwise is a clever debating technique, but that's about all it is.

UPDATE: Ed Kilgore has more on this in the New Republic today:

Students of economic development will recognize [this] as the “smokestack-chasing” model of growth adopted by desperate developing countries around the world....And students of American economic history will recognize it as the “Moonlight and Magnolias” model of development, which is native to the Deep South.....This was the default model of economic growth in Southern states for decades—as the capital-starved, low-wage region concluded that the way it could compete economically with other states was to emphasize its comparative advantages: low costs, a large pool of relatively poor workers, “right to work” laws that discouraged unionization, and a small appetite for environmental or any other sort of regulation.

....The problem with this Southern theory of growth is that it won’t work: Economic development experts usually deride “Moonlight and Magnolias” approaches to job creation, noting that they track the outmoded first and second “waves” of basic economic development theory—which emphasized crude economic races to the bottom—as opposed to third and fourth “waves” that focus on worker skills, quality of life, public-private partnerships, innovation, and sustainability. If Wisconsin and other states—not to mention the country as a whole—end up adopting these atavistic economic ideals, they will simply begin to resemble the dysfunctional Old South societies that spawned them in the first place.

So what is at stake in Wisconsin, and across the country, is not just the pay and benefits of public employees, or their collective bargaining rights, or the specific programs facing the budgetary knife. We are contesting whether Americans who are not “job creators,” by virtue of wealth, should be considered anything more than cannon fodder in an endless war between states—and countries—over who can attract the most capital by slashing the most regulations. In this sense, standing up to Scott Walker is a truly worthy fight.

As they say, read the whole thing.

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Quote of the Day: White Collar Crime

| Mon Feb. 28, 2011 4:22 PM EST

From Felix Salmon, on white-collar crime:

The fact is that white-collar criminals are, in general, incredibly good at deluding themselves that they’re good people, even when they clearly aren’t.

True! And true of lots of white collar not-quite-but-probably-ought-to-be criminals too.

Looking Glass Economics

| Mon Feb. 28, 2011 2:51 PM EST

So far austerity isn't working out too well for Britain and Germany. But how about America? How will it work out here? Well, as you'll recall, Goldman Sachs thinks the Republican budget cutting plan would reduce economic growth by two percentage points. Mark Zandi of Moody's Analytics figures the loss at 0.5 percentage points this year and another 0.2 next year. Economists at the Center for American Progress estimate the cuts would lead to nearly a million jobs lost. Steve Benen is nonplussed:

How is it this isn't at the heart of the debate over the budget? How far off track is the public discourse when an entire chamber of Congress, in the midst of a jobs crisis, approves a plan to make the crisis much worse, and this is considered only tangentially relevant?

I just spent the past hour on a call-in show out of New Orleans, and it was pretty clear that the callers didn't think too highly of my claim that income distribution depends not just on the economy, but also on deliberate political decisions. And I admit that it's a hard point to get across in a concrete way. But how much more concrete could our current situation be? Republicans — and, unfortunately, some Democrats too — are pushing for an economic austerity plan that will keep unemployment high and the job market loose. The result is downward pressure on wages, which keeps middle-class incomes stagnant and corporate profits high. This benefits the executive and investor class, and while it's a shortsighted benefit, it's a benefit nonetheless. And it's not thanks to globalization or returns to education or anything like that. It's due to a deliberate political decision that favors the rich at the expense of everyone else. That's as concrete as Hoover Dam.

Obama Calls the Republican Healthcare Bluff

| Mon Feb. 28, 2011 1:58 PM EST

The New York Times reports that President Obama plans to endorse a change to the healthcare reform law that would allow states to opt out from the start, rather than having to wait three years:

Senior administration officials said Mr. Obama would reveal to the National Governors Association in a speech on Monday morning that he backs legislation that would enable states to request federal permission to withdraw from the law’s mandates in 2014 rather than in 2017. The earlier date is when many of the act’s central provisions take effect, including requirements that most individuals obtain health insurance and that employers of a certain size offer coverage to workers or pay a penalty.

....The legislation would allow states to opt out earlier from various requirements if they could demonstrate that other methods would allow them to cover as many people, with insurance that is as comprehensive and affordable, as provided by the new law....If states can meet those standards, they can ask to circumvent minimum benefit levels, structural requirements for insurance exchanges and the mandates that most individuals obtain coverage and that employers provide it.

Italics mine. I suspect this is not as big a deal as it seems. Basically, Obama is calling the bluff of Republicans who insist that they can build a healthcare system that's as extensive and affordable as PPACA using some combination of tea party-approved "free market" principles. He's telling them to put their money (or, rather, money from the feds) where their mouths are, which will probably demonstrate fairly conclusively that they can't do it. It's possible that a state like Oregon might enact a more liberal plan that meets PPACA standards, but I doubt that Alabama or Tennessee can do it just with HSAs and high-deductible health plans.

Still, we'll see. This is a chance for conservatives to show that they have a better healthcare answer in the real world, not just as talking points at a tea party rally. Obama is betting they'll fail, and he's also betting they'll tear each other apart arguing over details while they do it. Life is easy when all you have to do is yell "Repeal Obamacare!" but it gets a lot harder when you have to produce an actual plan.

UPDATE: Ezra Klein suggests that Republicans have no intention of supporting this legislation: "Now that Obama has admitted it's not a threat to the Affordable Care Act, a lot of the appeal for Republicans dissipates." But it does become a way for Obama to demonstrate how reasonable he is. See, we gave them a chance to implement their own policies, but they turned us down. Maybe so.

Chart of the Day: The Real Pension Story

| Mon Feb. 28, 2011 12:10 PM EST

Via Paul Krugman, Dean Baker has a paper out today that explains why state pension funds are in trouble: It's the recession, stupid. The entire shortfall can be attributed to stock market losses and underfunding in just the past four years:

Figure 1 below projects pension fund assets if pensions had continued to earn on average a 4.5 percent nominal rate of return in the period since the end of 2007. Under this  assumption, state and local pension fund assets would have been $857 billion higher at the end of the third quarter of 2010.

.... In the period since the beginning of the recession, annual payments into state and local pension funds have averaged $6.9 billion less than withdrawals. By contrast, in the three years prior to the downturn, payments averaged $18.4 billion more than withdrawals. If state and local governments had continued to contribute to their pensions at the same rate as they had in the prior three years, then the total assets of these funds would be $77 billion higher than was reported at the end of the third quarter of 2010. Adding this to the $857 billion figure above results in an additional $934 billion in pension funds, a figure far higher than most estimates of the size of state and local government shortfalls.

Dean calculates that if pension funds continue to invest in a basket of assets that includes equities, and economic performance remains at historical levels, most states have a pension shortfall of less than 0.2% of income. If this is right, then either modest changes in state contributions or modest changes in employee contributions (or a combination of both) are all that's necessary to eliminate the pension shortfall entirely. It's just not as big a problem as critics are suggesting.

Hating on Vegetables

| Sun Feb. 27, 2011 1:54 PM EST

James Oliphant's piece in the LA Times today tells you everything you need to know about what's wrong with movement conservatism in America today:

Former First Ladies Barbara and Laura Bush worked to end illiteracy. Nancy Reagan famously took on teenage drug use. Lady Bird Johnson planted flowers. But none of them have been seared for something as seemingly benign as calling for kids to eat more vegetables, as Michelle Obama has.

Radio talk show host Rush Limbaugh....remarked on her waistline....Critics have carped about Obama's spread at her Super Bowl party....the end of school bake sales....government takeover of business....increase in pedestrian deaths....Mitt Romney...."Let them eat cake"...."I'm sorry," he crowed. "Organic cake."....encouraging mothers to breast-feed their newborn babies...."very consistent with where the hard left is coming from," [Rep. Michele] Bachmann said....Conservative blogger Jenny Erikson....Obama's efforts were "incredibly insulting to parents."

So that's where we are. A first lady campaigning against obesity and in favor of breast feeding is now the target of all-out war from the right. I imagine that if she were taking on illiteracy, teenage drug use, or planting flowers, the Republican Party would suddenly find itself opposed to reading, defending Mexican drug cartels, and in favor of vacant lots. And yet we're supposed to take these people seriously.

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Friday Cat Blogging - 25 February 2011

| Fri Feb. 25, 2011 4:06 PM EST

So here's the latest craze here at the homestead: piling on top of Kevin right after dinner time. Dinner for the cats is always at 5 pm and takes about two minutes to scarf down, and in the past they just meandered around the house for a while afterward. Lately, though, they track me down and they both want to flop down on top of me. This picture shows a typical scene of postprandial domestic bliss.

And what am I doing with that glazed expression on my face? I dunno. It must be 5:05, so I'm probably channel surfing between O'Reilly and O'Donnell and whoever's on CNN at 5 pm. Or maybe watching the local news. Who knows? Whatever it is, I'm trapped until I finally get tired and toss the cats onto the couch, where they maneuver to see who can claim the spot I was just sitting on. Usually Inkblot wins.

The Union Thuggery Lie

| Fri Feb. 25, 2011 3:50 PM EST

Conservatives are going all in on the meme that "union thugs" are rampaging through Madison and turning the streets of the capital into a bloody nightmare. It's a pretty effective meme, too, since lots of people are predisposed to believe that union members tend to be violent folks. (Historically, it was management that was largely responsible for the most famous violent encounters of the past, but never mind that. The legend is better than the facts in this case.) However, Dave Weigel is in Wisconsin and says the whole thing is baloney: "I just spent four days in Madison and the state Capitol, reporting, and saw absolutely no violence. There were no arrests on Saturday....There were no arrests last night....There are no arrests, so far, in Madison."

Dave's initial post is here, and a followup is here. Bottom line: this has been an amazingly peaceful protest. There's been virtually no violence to speak of, no matter how hard Michelle Malkin and Fox News try to pretend otherwise.

Chart of the Day: Waiting for Your Doctor

| Fri Feb. 25, 2011 2:34 PM EST

Aaron Carroll has had it with people insisting that it's OK for the United States to spend so much on healthcare because, after all, we have the best healthcare in the world. You get what you pay for, and at least we don't have to wait forever to see a doctor, like they do in other countries, right?

Actually, no. As the chart on the right shows, we have longer wait times than most:

Let’s own something right up front. We beat Canada. Let me say that again: WE BEAT CANADA. There’s a reason people always cherry pick Canada to talk about wait times. But many, many other countries do better in terms of getting people in to see the doctor when they are sick.

....People in the US feel like their doctors don’t know them. Why could that be? One reason is that more people feel like they don’t get enough time with the doctor. Since we’re so obsessed with wait times (even though we don’t do very well in winning that battle), doctors are forced to see more patients every day in order to avoid them. So, yes, you might not wait as long to see your doctor, but when you get there, he or she won’t have much time for you.

One of the reasons for this is that we have so few doctors in this country....And that’s after spending way, way, way more money than anyone else. How is this defensible? We’re failing. We really are. I have no problem with disagreement on how to fix the system, but it’s hard to believe so many of you want to defend the status quo.

As someone who just waited six weeks to see my doctor, I get this. It's not that I had to wait six weeks. I could have gotten in sooner if I'd been willing to see someone else in my doctor's practice. But that's not much better. If I see doctors randomly, none of them ever get to know me, and experts are forever telling us how important it is to build a long-term relationship with your doctor.

Of course, one of the reasons I like my doctor is that she doesn't routinely hustle me out of her office as if she's late for a golf date, the way my previous doctor did. The downside is that she's always running late and it's hard to get in to see her. This in turn is almost certainly because she has a high patient load, so her only options are to either run late or make sure appointments are never more than five minutes long. That's not exactly a great set of options.

And yes, I have good insurance. This isn't something that just happens to Medicaid patients. The fact is that we just don't have a very good healthcare system in the United States. You might be able to get a hip replacement here faster than you can in Canada, but there's a lot more to healthcare than that. And on most metrics, we do pretty poorly.

Evolution of the Crazy

| Fri Feb. 25, 2011 1:28 PM EST

Mild mannered Ron Brownstein writes today that Barack Obama faces a Republican Party more united, more right wing, and less compromising than at any time in the past:

In Washington, Obama is already colliding with a conservative GOP House majority determined to slash spending and regulation. But the president also faces multiplying conflicts with Republican governors. The breadth and intensity of these confrontations dwarfs the level of tension between Bill Clinton and a previous generation of conservative GOP governors in the 1990s. Indeed, it’s difficult to think of another president who faced as much resistance on as many fronts from governors in the opposite party as Obama is encountering today.

....Republican governors came out swinging against many of Obama’s initiatives at the opening bell....2009 economic-stimulus package....high-speed rail....carbon emissions....health care. Twenty-seven states—all but two of them boasting Republican governors and all but four GOP attorneys general—are suing to dismantle the law’s foundation....Put it together and it’s fair to say, without drawing any moral equivalence, that health care reform is facing more-extensive resistance from conservative states than any federal initiative since Brown v. Board of Education.

....American politics increasingly resembles a kind of total war in which each party mobilizes every conceivable asset at its disposal against the other. Most governors were once conscientious objectors in that struggle. No more.

Even after writing about this for most of the past decade, it's hard to fathom. When Ronald Reagan was elected, it seemed at the time like the ultimate triumph of hardcore right-wing politics. It was the Reagan Revolution! He was going to slash taxes, institute supply-side economics, bust the unions, appoint uncompromising judges, give the Christian right a seat at the table, and declare war on the welfare queens.

It couldn't get any worse, could it? Well, yes, it could: in the 90s we got the Republican Party of Newt Gingrich and Grover Norquist, and they made Reagan look like the jolly old man he's since been mythologized as. Taxes? They wanted a blood oath against ever raising them for any reason whatsoever. Gingrich gleefully led an assault on a Democratic Speaker of the House that destroyed his career, something no previous leader of either party had ever tried to do. The GOP flatly refused to negotiate on healthcare reform, they shut down the government in 1995, and then did their best to impeach Bill Clinton over a blow job. This was a take-no-prisoners party like we'd never seen.

But the Newt Gingrich of 1995 was, as Clinton said, still somebody you could deal with. He may have been right wing, but he cared about policy and he cared about getting things done. Today even that's gone. Obama got virtually zero support for a stimulus bill designed to help get us out of the worst recession since World War II, he got no support for rescuing GM and Chrysler, he got no support for healthcare reform, and he got no support for financial reform even after a decade in which big banks were so far out of control they nearly wrecked the entire global economy. He's been attacked from Day 1 as non-American, non-Christian, and non-patriotic. The filibuster became not just a tool of intense opposition to big legislation, but an everyday tool of obstruction. Tea partiers and Glenn Beck accused him of being a socialist for sure, maybe a Muslim too, and quite possibly a fifth columnist as well. Rush Limbaugh mocks his wife and prominent GOP leaders make jokes about whether he was born in Kenya. A government shutdown isn't just something that might happen if Obama and Congress can't find a workable compromise on the budget, it's actively viewed as a positive goal. And, as Brownstein says, governors are no longer on the sidelines, sometimes working with the president and sometimes not depending on what's best for their state. They're fully enrolled in the war against Obama.

I don't know how this turns out. A parliamentary system of government can operate this way, but not a presidential system. Somewhere, somehow, this wave has to crest and then break. But when? And how?